Surprise as Sars collects an ‘unexpected’ extra R10bn

Better-than-expected provisional and company tax payments in the last quarter of 2023/24 and a deliberate compliance drive by the South African Revenue Service (Sars) has boosted tax collections.

This resulted in total tax collections of R1.741 trillion and an unexpected surplus of R10 billion. The overall performance of companies still disappointed with their contribution contracting by almost 9% (R30.1 billion) to R317 billion.

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Read: Preliminary tax take beats estimate

Individual taxpayers continue to carry the heaviest tax burden, contributing more than 37% of the total tax revenue collected. Their contribution alone amounted to R651 billion, or R49 billion more than the previous year.

Sars on Tuesday announced its preliminary revenue collections for the 2023/24 fiscal year.

Sars Commissioner Edward Kieswetter noted that it collected R114 billion during the last four days of the fiscal year, the same amount collected for the entire 1994.

Value-added tax (Vat) collections represent 25.7% of all tax collections, with gross revenue collections amounting to R790 billion. However, R342 billion was paid out in Vat refunds, with R120 billion paid to small and medium-sized entities and R37 billion to individuals.

A total of R414 billion in refunds was paid, the highest quantum of refunds paid out in the history of Sars.

Compliance efforts

Kieswetter highlighted some of Sars’s achievements with its debt collection efforts and compliance programmes. The latter contributed almost R294 billion at the end of March, an increase of 27% or R62 billion on the previous year.

Sars completed 85 lifestyle and luxury vehicle audits, resulting in the collection of R850 million.

It detected under-declaration of income and prevented impermissible refunds to the tune of R21 billion. Fraudulent Vat refunds totally R101 billion were prevented from flowing out of the fiscus.

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Kieswetter says Sars is putting a test case together – involving 398 cases and amounting to R2.9 billion – that will go to court in May this year.

Sars has also netted R12.7 billion through interventions that targeted syndicated tax and customs crimes. Its Vat compliance drive yielded R116 billion.

At the height of the capture of Sars more than 3 000 people left its service, many of them highly skilled individuals.

Listen to Kieswetter speaking on SAfm Markert Update with Moneyweb about Sars’s FY2023 tax collection performance: 

You can also listen to this podcast on iono.fm here.

Things are looking up

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PwC tax partner Kyle Mandy says although their forecasts in February were in line with that of National Treasury, the last two months of the fiscal year (February and March) turned out to be relatively strong months across the three main tax types.

“It is particularly encouraging that corporate income tax held up very well in February and March, with collections R13 billion higher than the February estimate,” he says.

This is also positive for the outlook for the year ahead.

Sars collections: Current year (CY) vs previous year (PY)

Sars, Tax, Tax returns

Source: Sars

Mandy says since the base off which the 2024/25 revenues will have to grow is now R10 billion higher, it may suggest the forecast growth for corporate income tax might be underestimated.

This may “derisk” the revenue forecast for this year to some extent, and could bode well for a slightly lower-than-estimated budget deficit for this year.

Charles de Wet, tax executive at ENSafrica, says although there are still concerns about the lack of skills at Sars, its debt management efforts and increased compliance drive are yielding success.

Tax gap remains

Mandy adds that while Sars has made great strides in its compliance programme, it must be remembered that the net tax gap – the difference between taxes that should theoretically be collected and taxes that are actually collected – is estimated to be in excess of R300 billion.

“While there will always be a tax gap in any country, the level of SA’s net tax gap, more than 15%, is considered large. To put it into perspective, the estimated tax gap in the UK is under 5% and in Australia 7%.”

Halving the tax gap in SA would obviously have a positive impact on the country’s fiscal metrics – potentially freeing up space for tax cuts, increased social and capital spending and dramatically altering the debt trajectory, all at the same time, says Mandy.

“Closing the tax gap is a core responsibility of Sars and it is imperative that they be given the resources to invest in people and technology that would enable them to do so,” he adds.

Harry Byrne

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